Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 16 - Evidence

OTTAWA, Thursday, April 17, 1997

The Standing Senate Committee on Transport and Communications, to which was referred Bill C-32, to amend the Copyright Act, met this day at 9:40 a.m. to give consideration to the bill.

Senator Lise Bacon (Chair) in the Chair.


The Chair: Honourable senators, we have before us this morning representatives of the Canadian Association of Broadcasters, the Canadian Broadcasting Corporation, Association canadienne de la radio et de la télévision de langue française, and Golden West Broadcasting Ltd.

Please proceed, Mr. McCabe.

Mr. Michael McCabe, President and Chief Executive Officer, Canadian Association of Broadcasters: Thank you, Madam Chair. We appreciate this opportunity to appear before you. Before we start, I would like to welcome Senator Pépin. We hope she enjoys this area of discussion in the Senate as much as we do and that it is a fruitful start to her career as a senator.

Senator Pépin: Thank you.

Mr. McCabe: Elmer Hildebrand is president and chief executive officer of Golden West Broadcasting of Altona, Manitoba, a company which owns and operates 12 small radio stations in four provinces. Bernard Guérin is legal counsel for Télé-Métropole of Montreal, and he represents today Association canadienne de la radio et de la télévision de langue français. Cynthia Rothwell is our legal counsel.

The CAB, as you may know, is a national trade association which represents the vast majority of the country's privately owned advertiser-supported radio and television stations and networks and specialty services. We thank the committee for extending this invitation to appear before you.

We do not envy the committee's task of reviewing this complex piece of legislation in what amounts to a short period of time. We understand the government's desire to pass Bill C-32 before the end of this session of Parliament, particularly given the bill's long history and its importance in moving ahead to the next stage on the information highway. However, to us, we are not happy with the process, something which, perhaps, we can discuss later. To hustle this bill through this chamber in this fashion strikes us as shameful. I am sure that the Senate, in its role as chamber of sober second thought, will do what it believes necessary not only to get Bill C-32 passed but to ensure that it is a good law that meets its objectives.

The bill has had a rough ride. It has undergone close to 100 amendments since it was introduced in the House of Commons. There has been a great deal of concern expressed about the procedure employed to move the bill through all the various stages, particularly at the House of Commons Standing Committee on Canadian Heritage. During clause-by-clause review of the bill before the house committee, approximately 70 changes were rushed through in the course of a day, most without being read aloud. Some were drafted by officials on the run even as the clause-by-clause consideration proceeded. It was not, to say the least, a proud day for the parliamentary process.

Copyright is an area in which we would be the first to agree it is impossible to please all of the people all of the time. Simply because everyone on every side has something to complain about is not, we believe, a good enough reason to pass a bill. Above all, whether or not it pleases all interested parties, a bill should meet its stated objectives. This is where we believe Bill C-32 has some real problems which need to be addressed before it is passed.

We also believe, however, that, with a few minor changes, these problems could be addressed adequately and promptly so that the bill can receive passage before the dissolution of Parliament. With these few changes, Canada's broadcasters will be able to support the bill and move forward with phase three reform, confident there is sufficient balance in the law to ensure that the next phase of reform can proceed fairly.

In its current form, Bill C-32 does not achieve a fair balance between users and creators. In fact, it is far from that goal and would make Canadian copyright law almost exclusively a mechanism for the protection of creator rights with little balance for users. Left unamended, Bill C-32 would far exceed the creator entitlements in the copyright law of virtually every other country.

Unfortunately, this new direction that Bill C-32 embarks upon has been taken without careful regard as to how it fits in with another key pillar of Canadian cultural policy, that is, the Broadcasting Act, and the competitive environment in which Canadian broadcasters carry on business and promote our culture. Assurances that you may have received that Bill C-32 has now been amended in a manner that satisfactorily addresses broadcasters' concerns are simply not true. Our primary concerns have, to date, gone unheeded. In the interests of passing the bill and moving on with copyright reform, we are here today to urge the Senate to consider these key concerns and to make the changes needed so that broadcasters can support the proposed law.

Many provisions of Bill C-32 tilt it substantially in favour of creator rights, including the introduction of neighbouring rights, statutory damages, wide injunctions, new broadcaster obligations with respect to unpaid performer residuals, and the introduction of wholly inadequate ephemeral recording and transfer of format exceptions. From our perspective, none of these issues have been addressed adequately in the current draft of this bill. In fact, third reading amendments made neighbouring rights obligations more onerous.

By unreasonably compounding the risks and obligations broadcasters face, the bill threatens the ability of radio and television to maximize their contribution to the promotion and distribution of Canadian music and programming. The uneven playing field it creates as between U.S. and Canadian broadcasters will hurt our contribution to Canadian programming. French and ethnic language broadcasters will be discriminated against and given an incentive to avoid the use of non-English language music. Much local television and radio programming will become too costly to produce; and opportunities to showcase local talent will be reduced. The ability to serve the needs of viewers, especially those living in non-central time zones, will become extraordinarily difficult. Radio broadcasters will be hampered in their efforts to remain competitive by being saddled with new costs just because they have modernized their operations.

Ideally, we would have liked all the pro-creator measures which I mentioned to have been balanced. Realistically, we accept that many compromises must be made if this bill is to pass. To that end, we today propose only a few small amendments we believe are necessary to rectify the lack of balance in the bill sufficiently so that broadcasters can support it. These include the removal of the clause voiding the ephemeral recording exception where a collective exists and the removal of certain qualifications to the proposed transfer of format exception, in particular the qualification that voids this exception where collectives exist and the imposition of a 30-day time limit on the exception's validity.

More generally, the other imbalances which remain in the bill could be mitigated if the Senate were to recommend the prompt inclusion in regulation of a criterion that would require the Copyright Board, in setting rates for the use of music, to reflect the competitive realities which users face in carrying out their businesses. We respectfully ask this standing committee to make this recommendation in its report on Bill C-32.

Without these changes, however, we strongly believe that Canadian copyright law will be developing in a manner that is both inappropriate and dangerous in the context of Canadian cultural policy and international copyright law. An overly restrictive approach to exception in this phase may herald an overly restrictive approach to exceptions in phase three that could put a chill on information highway activity in Canada.

I will leave most the discussion of the need for amendment of the ephemeral recording exception, or time shifting exception, to my colleague Bernard Guérin because the exception as currently drafted has a particularly negative effect on French-language broadcasters.

I will review briefly the purpose of the exception and the kind of programming which relies upon it most. As you know, an ephemeral recording exception lets broadcasters tape live programming containing music for later broadcast. Twenty-eight other countries permit this exception. Successive Canadian task forces and governments have recommended its adoption in Canada. Without an adequate ephemeral recording exception, broadcasters would be able to air a live program containing music by paying their normal performance rights royalty, but as soon as the program was taped for temporarily delayed broadcast, additional copyright fees would become payable for reproduction. We do not think that is right.

Programs that usually need to be time-shifted are generally local events such as concerts, parades, festivals, church services, telethons, instant replays of sports containing music, and Canadian events programming delayed for time-zone purposes. Wherever broadcasters want to make long-term use of reproductions they pay for them. We will pay for them. We estimate that we pay $20 million each year for these long-term uses; and this will not change.

However, without an adequate ephemeral exception, broadcasters will have to start paying additional fees for temporary recordings of a narrow range of shows which do not even generate enough revenue to sustain new costs. Without an adequate ephemeral recording exception, broadcasters' production and carriage of these kinds of shows must be cut.

For further discussion of the ephemeral exception, I would like Mr. Guérin to address the committee.


Mr. Bernard Guérin, Legal Counsel, Télé-Métropole Inc.: Madam Chair, I want to say a few words about the Association canadienne de la radio et de la télévision de langue française. The ACRTF represents French-language television and commercial, privately owned hertzian radio stations in Canada. Its membership is made up essentially of firms whose head office and place of business is in Quebec.

The bill to amend the Canadian Copyright Act, as passed by the House of Commons, raises a number of serious concerns for French-language private broadcasters, particularly as regards the obvious discrimination that will arise from the passage of sections 30.8(8) and 30.9(6) of the bill.

Mr. Hildebrand will discuss section 30.9 in greater detail and the changes we feel need to be made to that provision.

The mechanical reproduction of recordings is an ongoing, necessary activity in the field of broadcasting. Over the years, all stakeholders in the music industry have been called upon to ponder this issue and the consensus among them has been that reproduction was a necessary adjunct to production and broadcasting activities in the fields of both radio and television.

Many of our principal trading partners, including the United States and the United Kingdom, have recognized the importance of reproduction and have allowed an exception for ephemeral recordings for television and radio broadcast.

The approach taken by Canadian broadcasters is consistent with the Berne Convention of 1948 to which Canada is a party. Canadian French-language broadcasters view this bill as being clearly discriminatory toward them given that there is no English collective similar to SODRAC in existence at the present time.

SODRAC is a collective representing a vast repertoire of French-language musical works, both Canadian and foreign. Forty-nine per cent of SODRAC is French-owned (SACEM/SDRM). This collective represents the repertoires of over 45 national collectives, and as such, the musical repertoire of the majority of ethnic stations in Canada.

The Supreme Court held in a 1990 ruling in Bishop that it was the legislator's responsibility to take the necessary steps to exempt radio and television broadcasters from having to pay royalties. The Court's ruling reflected numerous government pronouncements on this thorny issue.

More specifically, the Minister of Communications and the Minister responsible for Consumer and Corporate Affairs released a joint communiqué on March 27, 1992 announcing the impending review of the Copyright Act, at which time provision would be made for an ephemeral recording exception .

After many years and many promises, the legislator came up with sections 30.8 and 30.9 of the Canadian Copyright Act. We feel these provisions do not adequately address the issue raised by the Supreme Court and by various government reports or the real needs of broadcasters.

Consequently, the ACRTF urges the Senate of Canada to send Bill C-32 back to the House of Commons for further consideration and amendment in order to eliminate any possibility that it could discriminate against a particular group of Canadian radio or television broadcasters.

In fact, the agreements between SODRAC and various broadcasters were signed on the understanding among French-language broadcasters that these agreements would become obsolete, what with the impending adoption of the ephemeral recording exception. For this reason, all of the agreements included provisions whereby in the event of a legislative change, they would be automatically renegotiated once the ephemeral recording exception rule were adopted.

In the vast majority of cases, broadcasters need to mechanically reproduce works for their programming purposes. Reproduction in these instances is not done for commercial reasons or for financial gain; copyright owners are already compensated by broadcasters who pay royalties for the privilege of using these works.

In Canada, copyright holders collected over $48 million in 1994 from commercial radio and television broadcasters.


Mr. McCabe: From the perspective of all Canadian broadcasters and, in particular, francophone and ethnic broadcasters, the following questions need to be answered as to why such a limited ephemeral recording exception has been introduced: Why should an exception be given with one hand and taken away with the other just because a collective exists to license a very limited and technical use? Why should Canada differ in its copyright law from five other G-7 countries that have already allowed such an exception without voiding it where a collective exists? Why, at least for the foreseeable future, should French and ethnic language broadcasters face discrimination with respect to ephemeral recordings? What are the fundamental changes that have occurred in copyright law that justify government in reneging on its commitment to introduce a full ephemeral exception as promised as early as 1992?

Canadian broadcasters cannot support Bill C-32 as long as the collectives' qualification nullifies the usefulness of the ephemeral recording exception. We urge the Senate to amend the provision by deleting it, a simple measure that should not delay the progress of the bill.

I would ask Mr. Hildebrand to address the question of transfer of format.

Mr. Elmer Hildebrand, President and CEO, Golden West Broadcasting Ltd.: Canadian broadcasters also require specific amendments to clause 30.9 of the bill, the proposed transfer of format exception, in order to give their support to Bill C-32.

A meaningful transfer format exception is critical so that broadcasters can modernize their plants and keep their operations competitive without incurring additional copyright fees for technical, non-commercial reproductions of music that occur in the course of day-to-day broadcasting.

About one-half of Canada's radio stations have adopted computer-based music systems. It is expected that all broadcasters will eventually adopt this new technology.

In order to use music on air, broadcasters with computer-based operations regularly transfer CDs and tapes to their stations' computer hard drives or servers. This is not a revenue-generating activity; it is a matter of housekeeping. It is a matter of operational efficiency that has become necessary for stations to survive and to remain competitive. Radio broadcasters already pay $22 million a year for the right to broadcast songs.

As format transfers have become integral to broadcasting, there should be no need for any requirements to make further payments to rights holders.

While clause 30.9 of the bill purports to address broadcasters' needs to make format transfers, two provisions of the exception render it virtually worthless. The first is the same qualification with respect to collectives as appears in the proposed ephemeral recording exception discussed by Mr. Guérin. The second is the requirement that reproductions made pursuant to the transfer of format exceptions be destroyed no later than 30 days after the transfer is made. Again, this 30-day process is patently ridiculous in the daily operation of our business.

For the transfer format exception to be of practical value to broadcasters, these provisions must be deleted.

The collectives' qualification completely undermines the value of the proposed transfer format exceptions. It creates the same inequities for French and ethnic language broadcasters as the proposed ephemeral recording exception. Indeed, SODRAC is currently suing several Quebec radio broadcasters on account of format transfer and ephemeral recordings.

No collective of English language music right holders today exists to offer transfer of format licences, but there are no guarantees that they will not form. Representatives of CMRRA and CIRPA have suggested that they have no interest in collecting for format transfers. While we appreciate these reassurances, these representatives do not speak for all English-language rights holders.

The required destruction of format transfer after 30 days is a big problem. The second essential amendment to the proposed transfer of format exception is the removal of requirements that all transfers be destroyed within 30 days. These qualifications have the effect of making what is held out to be a transfer of format provision merely an extension of an ephemeral exception. To treat format transfers as an ephemeral recording misses the point entirely. By requiring the destruction of format transfers after 30 days, the exception requires radio stations to dump their entire music libraries as programmed on to their computer hard drives on a monthly basis. This could not practically be done without expending disproportionate amounts of labour in administration, something which would undermine the whole raison d'être of the exception to permit efficient technical operation.

In light of the technical non-commercial users at stake here, broadcasters urge the committee to remove the part of subclause (4) that deals with the issue of the 30-day destruction deadline and all of subclause (5), which directs that payment made for retention be on this period.

I will illustrate briefly some of the problems as they relate to our own small market radio station. As the committee members from Manitoba will know, our radio station provides service to rural Southern Manitoba. Our music presentations and radio service is different from what is heard in many metropolitan markets. As it relates to the 30-day exemption, let me illustrate how silly this process becomes in our every day work environment.

Our music library contains tens of thousands of music selections. I have brought for the committee a computer print out of our music library. There are two or three inches of single-spaced paper here that I should like to leave with the committee. It shows the music which we have in our music library.

We take the music from the library and we put on to computer that music which we want to use in the next season or the next cycles. If we need to dump this whole process every 30 days and redo it over and over, this is non-productive. In the olden days, music was aired from 78 rpms. It was then aired from 33-1/3 recordings -- some of you may even remember 45 rpm records. We then went to LPs, then to tape or digital audio tape and then CDs. How we transfer the music selection on to computer hard drives for airing should not be of any concern to anyone simply because that is an internal housekeeping process. We are already paying for the broadcast of all this music.

This whole process is analogous to someone who is going to a movie theatre. He buys a ticket to see the movie, sits down on the left side but decides that there is someone in front of him over whom he cannot see the screen so he moves over to the right side of the theatre but, in so doing, would have to pay again for moving to another seat in the theatre. This is the kind of process that we are up against. It is patently ridiculous.

Under the bill as proposed, every 30 days I would need to throw everything off my hard drive or servers and reactivate it again. It is sort of like pouring water out of a glass into a pitcher and then pouring it back into a glass. We have not made any progress. It has been totally useless work. This kind of Draconian bureaucratic work might make a lot of sense in Ottawa or other cities, but in Altona common sense says this is not the way to go. It is time consuming, expensive, and serves no purpose. As you know, we are in more of a computer era than ever before. Just like transfers among computer programs do not affect further fees, this kind of procedural process at radio stations should not be subject to extra charges.

Other format transfers are permitted by Canadian copyright law. There is already a de facto format transfer exception that allows the owners of computer programs to make copies. This is not something that we think should isolate broadcasters so they would have to pay twice for this transfer.

There is no reason why broadcasters should be extended an analogous exception to their technical reproductions. Nothing in our current or potential international commitments would prevent the introduction of such an exception. Given the absence of any solid rights holders or evidence as to why a meaningful exception should not be introduced, we urge the committee to make the requested amendments to the proposed transfer of format provisions.

I should like to make one other point as it relates to time shifting. Again, as it relates to Southern Manitoba and the small market, we record many events for future broadcast. We record talent nights, musical festivals and church services. We then rebroadcast them at another time. We then rebroadcast them many times to provide exposure to local artists. In one form or another, these artists sometimes get to the point where they produce a tape. Some day, they might even develop a CD. Most of these CDs and tapes are purchased by immediate family members and friends. By our giving exposure to these artists, every now and then they actually get enough exposure to get some national or provincial exposure. That is how stars are developed. By starting small and by giving them exposure, we can ultimately develop stars. If the time-shifting process is not allowed, our radio station would not be able to do any of these things. If we must get authorization and clearance for every event that we record today for broadcast next week, the administrative and bureaucratic process would drive us bananas. It is not worth it. This would be to the detriment of a lot of future Canadian talent, and Canadian talent is something that we want to develop and nurture.

Many of the things in this bill as they are presently stated go against the objective of the Canadian people, Parliament and broadcasters. We urge you to make these minor changes to the bill that will certainly go a long way in letting the broadcasters support the bill.

Mr. McCabe: We now explain the ways in which Bill C-32 lacks balance and moves Canadian copyright law firmly in a pro-creator direction.

In our original submission to the house Standing Committee on Canadian Heritage, we urged the inclusion in legislation of criteria that would require the Copyright Board to set tariffs in a manner that reflects the competitive and regulatory circumstances of users. The House chose not to include additional criteria in the bill itself but preserved in the bill a provision that permits the Governor in Council to issue directions to the Copyright Board in regulation that relate to the board's methods of setting tariffs.

That being the case, the CAB urges this committee to make the following recommendation in its report, namely, that regulations be introduced which require the Copyright Board, in setting tariffs, to reflect the competitive realities which users face in carrying on business. Such regulations would ensure that the board, in fulfilling its obligation to set fair and reasonable tariffs, reflects the market value of music used and other competitive considerations affecting various users.

In conclusion, broadcasters appreciate the strong desire of the government to pass this bill prior to the dissolution of Parliament. For that reason, broadcasters have agreed to compromise on many of their original concerns, notwithstanding that they have not been addressed adequately. We remain firm in our belief that the amendments which we have called for here today must and can be made without causing the failure of this bill. In addition, broadcasters believe that the imbalance of the bill could be mitigated somewhat if the Senate recommended the prompt introduction of regulation which would direct the Copyright Board to take into account competitive realities facing users and setting tariffs.

What we are talking about here today are practical and sensible amendments that we need in which to operate our businesses. We believe they can be made.

The CAB and the ACRTLF thank the committee for the opportunity to have made this presentation. We welcome your questions.

The Chair: Thank you, Mr. McCabe. What impact will digital pay radio have on your members? Since the U.S. recognizes neighbouring rights for digital radio offered on a subscription basis, will you have to make payments to American musical performers?

Mr. McCabe: First, digital radio is something toward which we have been driving hard over the past many years. We think it is essential to our future as radio broadcasters. We expect that, beginning in next year and extending over a period of 15 years or so, we will be in the process of introducing digital radio. It will take 10 years to 15 years to introduce digital radio fully to Canadian listeners.

I would ask our legal counsel to address your specific question.

Ms Cynthia Rathwell, Legal Counsel, Canadian Association of Broadcasters: Madam Chair, to clarify the American neighbouring rights commitment, there is an obligation of digital radio to pay neighbouring rights in the United States only insofar as it is a digital subscription service, not conventional digital radio.

Thus, Canadian digital radio, as we are currently developing it within the CAB, would remain a conventional broad service and not a subscription service of the kind that would invoke a neighbouring rights payment in the United States.

If our members were to get into subscription services, which I am sure many of them will be considering, then the obligations would run reciprocally between the United States and Canada.

Senator Roberge: Thank you for a good presentation. You say we are net importers of intellectual property. What would be the percentage, in your estimation?

Ms Rathwell: The statistics are that 60 per cent of our copyright payments currently, on account of music in the broadcasting industry, leave the country.

Mr. McCabe: There is no reason to believe it would be different in the case of either neighbouring rights or others included in this bill.

Senator Roberge: That is unless we get many more Céline Dions on the charts.

Mr. McCabe: Céline Dion is recording for an American recording company which will own at least one-half, and some would suggest all, of these rights. Perhaps that is not so for an artist as important as Ms Dion but, for most artists, the record company will take the neighbouring right. The recording artist will not see it, as most of them have admitted. In Ms Dion's case, those payments will then go to her American record company or, in some cases, to her French record company.

Senator Roberge: You also say in your brief that foreign creators will get copyright payments from and can be awarded remedies against Canadian users which these same creators are not entitled to receive in their own countries. What about the signatories of the Rome convention with respect to that?

Ms Rathwell: Senator, there are two ways in which we believe new royalty payments will flow to foreigners. The first is through what could be considered a somewhat lax construction of the reciprocal agreements under neighbouring rights. For example, the reciprocal obligations under the Rome convention arise based on the nationality of a record producer.

If a record producer is essentially an American multinational but has a Canadian subsidiary, then they will qualify for Canadian status for purposes of neighbouring rights.

More specifically, we believe that new payments on account of reproduction rights will flow to large American record companies, as well as to large American music publishers, as a result of the very limited and ineffectual ephemeral right granted in the bill before you.

The Americans, as we have tried to explain, have a very broad ephemeral exception in their own copyright law. To that extent, publishers and record companies there will not receive recompense for ephemeral uses or transfers of format which they would receive in Canada.

Reproduction rights are not a matter of the Rome convention, therefore, the reciprocity provision is not in place. It is national treatment for the Americans. They will begin to realize rights here which they have never realized in their own country.

Senator Roberge: When Bill C-32 was first tabled in the House of Commons, that is, before the amendments were proposed, were you satisfied that there was proper balance between users and creators?

Mr. McCabe: No. As a matter of fact, we were shocked when we saw the bill as it came into the house.

We had been in discussion with many successive governments and officials in the Department of Canadian Heritage, also under several governments, on an ongoing basis concerning the question of the ephemeral and transfer of format exceptions.

On the transfer of format exception, we knew there was considerable doubt in their minds about whether it ought to be brought into the law. Quite clearly, we felt that it struck them as sensible, as Mr. Hildebrand has described, having to dump the music every 30 days. It struck us that the officials and, indeed, by extension, ministers, thought this was sensible. However, it was a new kind of provision in copyright law so they were a little concerned about it.

On the other hand, the ephemeral exception was one on which the discussion had gone on and on. Following the Bishop case, the discussion was never about whether there should be an exception but always about what its duration should be, whether it should be 6 months, 48 hours or one week. That was always the discussion. We really felt quite betrayed when we saw that it was not there at all. There was no transfer of format exception and no ephemeral exception.

On the matter of neighbouring rights, we felt satisfied -- perhaps the term "satisfied" is too strong. We felt that members of Parliament had worked very hard to find a compromise which, in effect, took one-half of the revenue of the industry, broadly speaking, off the table for that purpose. We have accepted that. We said we would not press that matter further. On that there is a modicum of satisfaction, but, on other matters, we felt there was no balance.

Senator Roberge: At that time, you made some representations and they presented these two exemptions?

Mr. McCabe: Yes.

Senator Roberge: I would imagine you have discussed with them these two exemptions.

Mr. McCabe: Yes, we have discussed them.

Senator Roberge: I am talking about the process.

Mr. McCabe: We discussed them endlessly with officials and, indeed, with house committee members during the process.

To tell you the truth, it was like talking to a brick wall. It would appear that the main matter which is of consideration for us -- that is, the fact that the existence of a collective would void the exception -- stands as a matter of doctrine with those who have written this bill. They were not to be moved. They did not quite sing the song We Shall Not Be Moved but it was quite evident that that was their position.

In respect of transfer of format, there seemed to be a complete unwillingness to listen to the "ridiculousness" of being required to take music for which you have paid and put it on your hard drive so that you can actually put it on the radio. You cannot put it on the radio in most of these stations unless you do it that way. You then have to pay again. We said that it did not make any sense.

Then they come along and said that they will let us keep it for 30 days, after which you must dump it out of the great long list that Mr. Hildebrand showed you. You must then dump it out of your hard drive and then put it back on again. We said that also did not make sense, but we were faced with blank looks.

Mr. Hildebrand: We tried to appear before hearings of the Commons committee earlier, but there was never any time. Seemingly, they had time for organizations of every stripe. I tried to appear right from the day that hearings were announced and there was no time. We are thankful that the Senate committee has made some time to hear our concerns.

Senator Roberge: You say that Canadian broadcasters are also creators. Can you explain to me how you are creators? Are you talking about your signal?

Mr. McCabe: It is a part of this bill which concerns us that we, in the course of trying to press these other important matters, have not pressed but will press in phase three of the bill.

As broadcasters, we assemble a broadcast day. We put together the pieces of music and talk and entertainment and information. In that respect we are creators in the same way that a record company counts as a creator in terms of this bill. They put together the music and the artist and the orchestra and the lyrics to create the work. We create the work of a broadcast day in all of the various creative pieces we put together.

Senator Roberge: You could say that for most businesses, I suppose.

Mr. McCabe: Indeed. In many countries, a signal right is recognized. In other words, it is a neighbouring right to copyright just like the neighbouring rights you are recognizing in this bill. We believe that that is not recognized. We will want to talk to that in phase three of the bill.

Ms Rathwell: The bill recognizes a limited signal right for Canadian broadcasters. It is the bare minimum, and arguably less than the minimum, required by the Rome convention. As you were saying, most businesses are engaged in the compilation of a product at the end of the day, but the Rome convention recognizes that this, indeed, is a type of intellectual property in itself.

This bill does not recognize a right and then give it any meaningful substance or protection. It creates a right, but the ability to enforce it is virtually non-existent. Just as radio stations use records, the primary users of our signals are distributors like cable, direct-to-home satellite, and new technologies for delivery that are currently developing.

Our position has been consistently that if other creators are being extended full neighbouring rights that have meaningful entitlements and protections attached to them, then broadcasters should equally receive full recognition as creators. That has been denied to us in this bill. Not only have we been denied reasonable user provisions, we have also received somewhat of a slap in the face as creators.


Senator Grimard: First of all, I want to congratulate you on your presentation. Not only was it well done, but I enjoyed the way each witness spoke in turn, thereby avoiding a lot of repetition. I was impressed. I hope that other groups that appear will proceed in the same fashion.

Could you tell me what percentage of radio and television broadcasters will be paying $100 a year to comply with the new legislation?

Mr. Guérin: You would have to ask Mr. Arpin. I know that he already answered that question before the Commons committee. I believe a significant number, that is a majority of broadcasters, will be paying this fee. I do not recall the exact figure, but it is significant. Essentially, we are talking about small stations that pull in less than the revenue ceiling.

Mr. Grimard: Are we talking about the same number of French-language and English-language stations?

Mr. Guérin: I would have to check the figures.

Senator Grimard: Pursuant to clause 30.9, a broadcasting undertaking may make reproductions using another format, provided the reproductions are destroyed at the latest within 30 days of being made. Were you given an explanation as to why a 30-day time limit was chosen? This does not seem like a great deal of time to me?

Mr. Guérin: No. The only thing I can see is that pursuant to the Broadcasting Act and the broadcasting regulations in particular, we are required to preserve all material on tape for a 30-day period. Most likely there is a connection with the CRTC's regulatory requirements.


Mr. McCabe: As our counsel suggested earlier, it flows from a deep misunderstanding of what we are talking about. There seems to be a total lack of comprehension on the part of officials drafting this legislation of the fact that we are not talking about an ephemeral use -- that is, a use for 30 days and then destruction -- but a use we need to make mechanically in order to operate our businesses, and that that use is ongoing.

No adequate explanation has ever been given.


Senator Grimard: Regarding neighbouring rights, if I understand correctly, you currently pay approximately 3 per cent in traditional copyright fees. I am talking about musicians, that is composers and songwriters. What percentage of their revenues will your best stations be required to pay for new neighbouring rights? What additional percentage? Are we talking about 1 per cent or 2 per cent? Could either you or the other witnesses give me some idea?


Ms Rathwell: Senator Grimard, I do not believe we are able to make a determination of that figure for the reason that it will be set in the future by the Copyright Board during a full tariff hearing. There is no precedent for this here. Therefore, at the end of the day, we have no idea as to what the ultimate amount will be, whether it will be less than the amounts payable currently for performing rights or whether it will be equivalent or more to those rights.

Senator Roberge: Coming back to your recommendation that regulations be introduced to require, when setting tariffs, utilization of competitive realities, are you concerned with clause 66.9 which provides the cabinet with unprecedented powers to direct policy and to direct the board to decide on royalty price? This is a quasi-judicial body.

Mr. McCabe: I understand the concern about too broad a power resting with cabinet in terms of making regulations. In this particular instance, where the House chose not to include amendments or provisions in the law that we believed were necessary to reflect the competitive realities with which we live every day, we are pleased that there is provision, should this law pass, for the government to recognize that. The government has been increasingly concerned, as you noticed, with competitiveness in the broadcasting industry. We hope they will reflect this in the way they regulate.

More specifically, we hope that you will feel free and fit to tell them that this is a concern of yours as senators.

Senator Grimard: Clause 92 of the bill states, in part:

Within five years after the coming into force of this section, the minister shall cause to be laid before both Houses of Parliament a report on the provision and operation of this Act...

Do you think it would be a step forward if this delay were reduced from five years to two or three years?

Mr. McCabe: I have two answers to that, senator. From our point of view, we are deeply concerned that provisions of this bill will affect us economically, as well as affect our programming, at a time when there is extraordinarily rapid change in the world of broadcasting. A period of three years might more properly reflect the realities of broadcasting. However, the pace of change has speeded up. How many years has it taken for this bill to come about? Nine or 10 years. Let us not get caught again like that.

We are pleased to have five years, if that is all there is to be. I have to tell you that three years would much more accurately reflect what is happening in the real world out there, if Parliament were able to look at it again at that point.

Senator Kinsella: Perhaps the legal counsel could review for us the current situation when it comes to transferring to different formats. What is the nature of the legal obligations under which you are currently under? How will clause 30.9, or others clauses of the bill, change that?

Ms Rathwell: Strictly speaking, the current legal obligation is that radio stations should be required to pay for a transfer of format. I do not want to misconstrue this as an obligation that we have never honoured. For years, transfers of formats and reproductions for ephemeral rights, which are both within the context of the same right, were assumed to be an implied right within the right to broadcast or perform the works.

Originally, I believe it was a commonly held belief among lawyers and stakeholders that those sorts of reproductions did not fall strictly within the reproduction right under the Copyright Act, but were an implicitly permitted activity in connection with broadcasting. Broadcasting is simply impossible to do without making those sorts of limited reproductions.

You have probably heard of a case called Bishop and Télé-Métropole which was decided by the Supreme Court in 1990. That case was a case brought by rights holders against a television station for ephemeral reproduction in which they said, "This conception of an implied right is legally and technically incorrect because the reproduction right is separate from a performance right."

The court held on a very narrow decision that it was essentially a matter of statutory interpretation that, indeed, there was no implicit exception for ephemeral recordings or transfers of format, that the legislature would have to enact that exception.

The court in its decision, however, noted that many, many countries throughout the world recognize this exception; and that the exception was permitted under international conventions. I believe the justice who delivered the opinion in Bishop even said that she was not unsympathetic to the position of broadcasters. Nevertheless, in deference to Parliament, they said it would have to be a matter that was enacted as an exception into legislation.

Therefore, from the time that that decision was rendered, we have been pressing and, as has been explained, we have received guarantees that an ephemeral exception would be included in legislation.

In Quebec, I should clarify, there is a collective that exists for reproduction rights. Since Bishop and Télé-Métropole, that collective, SODRAC, has, under threat of injunction, forced several television broadcasters to enter into agreements which subsume ephemeral and transfer of format activities. Perhaps Bernard Guérin can speak to that.

All of these provided for renegotiations of the contracts when the exception was introduced into the legislation.

Senator Kinsella: Does the present regime require any kind of record keeping on the part of the broadcasters?

Ms Rathwell: No, it does not. As you are probably aware, senator, Bill C-32 includes those requirements. Indeed, we offered to undertake record keeping when we were having discussions with officials about these rights. We are willing to undertake that sort of record keeping.

Senator Kinsella: What is your advice to this committee concerning the constitutionality of the provision of the right of access, and I refer to page 43 of the bill, the proposed clause 30.9(3) which states:

The broadcasting undertaking must make the record... available to owners of copyright ... or their representatives, within twenty-four hours after receiving a request.

Describe for me what you will be advising your clients should this bill pass with that provision?

Ms Rathwell: I should say at the outset, Senator Kinsella, I am not a constitutional lawyer. I do not regularly give advice on the Charter of Rights and Freedoms.

All I can tell you is that, in the context of the access provisions here, we concur with the record keeping and we are willing to give access. Whether 24 hours is reasonable or not, I do not know. In other parts of the bill, there are provisions for collectives to give access to users, such as in terms of explaining what repertoire they represent. The collectives are always required to give the information within a reasonable time. The provision which you cite is somewhat more harsh. We would prefer to see it say "reasonable" rather than "24 hours". As I said, our objective is not to undermine our record keeping obligations because we understand why creators want those.

Senator Kinsella: What would those records look like?

Ms Rathwell: Perhaps I could let Mr. Hildebrand address that, since he is a broadcaster.

Mr. Hildebrand: Because much of our music is played off computer hard drives, it is not difficult to provide a list of all the music that aired yesterday, for example. That process would not be onerous.

Mr. McCabe: We already do this, as you undoubtedly know, senator. For purposes of the CRTC, we keep a record of everything we do. That would be the base for that, certainly as a print-out, essentially.

Senator Roberge: You showed us a big bundle of computer print-outs that would have to be redone monthly.

Mr. Hildebrand: That is a list of the music in our library, not what is played every day. That would be separate list.

To provide a balance of music, you select tomorrow's music off your computer server, and that is part of that process. My illustration was to show the absurdity of taking the music every 30 days, throwing it out and replacing it as soon as you dumped it. You would put it back because you need it for tomorrow. That process is very weird. The administrative nightmare of doing it is odd.

Senator Roberge: I understand it is weird. I agree. How long would it take physically?

Mr. Hildebrand: We do not know that yet. This is not something we do now. However, it would be a big job because you need to ensure it is all correct. Someone has to oversee this, and it is not just as simple as pushing a button. It is another major job that would have to be undertaken at a radio station. It is an administrative process that has no benefit to our mandate, which is to provide service to our audience. If we are spending all of our money and time putting things back into computer bases, that is really very unproductive, and we cannot see for what purpose this part of the legislation sits there. It makes no sense.

As Mr. McCabe said before, much of the bill has been drafted by bureaucrats who obviously do not understand what happens at a radio station. We do not know of any of the drafting people or anyone involved in making this bill ever visiting a radio station to see what is done there. It is hard for us to understand what the objective is, other than to create more work.


The Chair: Clause 30.8(4) on page 40 of the bill reads as follows:


The programming undertaking must destroy the fixation or reproduction within thirty days after making it, unless (a) the copyright owner authorizes its retention; or (b) it is deposited in an archive, in accordance with subsection (6).


Senator Roberge: I was aware of that. I was curious as to the time this would take.


Senator Kinsella: What is your point?

The Chair: Ephemeral recordings under clause 30.8.

Senator Kinsella: I know, but what is your point?

The Chair: It is in accordance with subclause (6).

Senator Kinsella: I do not understand the point you are making, though.

The Chair: It says "unless the copyright owner authorizes its retention".

Mr. McCabe: The point is we would have the privilege of paying in order not to do the foolishness.

Senator Kinsella: How would that work?

Mr. Hildebrand: We do not know.

Mr. McCabe: As I understand it, and as the bill stands now, if we did not want to go through the foolishness that Mr. Hildebrand describes, then we could enter into an agreement with the owners, through a collective, to pay extra in order not to do that. That strikes us as absurd. We have already paid for this music. We cannot get it on the air unless we go through this mechanical step because, for economic reasons, we have gone to hard drives in half our stations, soon to be most of them. In order to put it on the air, we have to put it into our operating system. We paid for the music and they want us to pay again.

Senator Kinsella: The first time you would have paid to put it on the air for a period of 30 days.

Mr. McCabe: No. We would pay to put it on for the whole year. We pay 3.2 per cent in radio and 2.1 per cent in television of our gross revenue to SOCAN, the collective for performing rights. That money pays for all uses of that music throughout the year, except if we need to rerecord it either to delay it for time shifting purposes or to get it on to our operating system. The bill proposes that those uses are exempt, unless the other fellows set up a collective to collect money from us to do those things. Then, as I say, we have the privilege of paying again. If we play that music live or the CD comes in the door and we put it on the air as a CD, we have paid for it in our 3.2 per cent of our gross revenue. However, as soon as you record it on to your operating system for the purposes of playing, because that is the way your station runs, you will have to pay extra under this bill. You will have to make an agreement, get a licence and pay extra.

The Chair: The Canadian Music Production Association is on the record as having no objection to the retention of such copies for use by radio broadcasters. They are willing to license its use to radio broadcasters for a token amount.

Do you disagree with that, Mr. McCabe?

Mr. McCabe: Yes. I wonder if the rights holders that are members of David Basskin's agency, when they see that SODRAC has managed in the province of Quebec to get some free money for this purpose, will say, "No, David, we do not want that money". I do not believe that. I believe David Basskin and the others speak in good faith.

The Chair: He has another point of view.

Mr. McCabe: However, I believe the temptation will be too great for his members, the people he represents. When they see money flowing for this purpose, I think they will be inclined to say, "Perhaps we should get some of that money, too." Laws are not made for good people in good circumstances. They are made for difficult circumstances.

Senator Kinsella: Was this particular issue negotiated, debated, during the past five or eight years this has been under review? Did this very particular issue get discussed among the stakeholders in this area, including yourselves?

Mr. McCabe: I have to tell you that over the past several years the major discussion among ourselves and the stakeholders -- and it was a heated one and it was one which, frankly, poisoned the whole atmosphere on both sides -- was the discussion about neighbouring rights. We just went head-to-head on it. Finally, through the good offices of a great many members of Parliament, we managed to arrive at an agreement with which we are broadly prepared to live.

In the cases of the ephemeral exception and the transfer of format, broadly speaking, these were discussed with officials and to some extent with the stakeholders on the other side. The expectation, at least on our side, was that these would be addressed in this bill. We did not get into a discussion to arrive at agreements that would obviate the necessity for legislation, because it was felt these, given the discussions we were having, would be part of the bill. When they were not part of the bill, we were quite taken aback and then got into the discussion. In many ways, had we not been led along that path, what you talk about probably would have made some sense. We would have had discussions to deal with these obviously sensible uses.

The Chair: Does the English collective ask for payments now? You keep mentioning SODRAC.

Ms Rathwell: Currently, no, because, strictly speaking, there is no English collective for this purpose. They are an agency and they cannot offer a blanket licence.

The Chair: Do they ask for payments?

Ms Rathwell: No, but as Mr. McCabe said, given what is happening with SODRAC, and given the allure of money that was heretofore unavailable to them, particularly the members who are Americans and who have never realized this sort of windfall in their own country, we believe there is a real risk. It is a practical use. It is a non-commercial use. We have not been provided with any justification by the creators as to why there should not be an exception for this purpose.

The Chair: How much does SODRAC ask for this?

Ms Rathwell: Perhaps Mr. Guérin would like to speak to that.


Mr. Guérin: Our initial agreement called for our paying a little over $400,000 a year in royalties for the mechanical reproduction of works included in SODRAC's repertoire.

In Télé-Métropole's case, this does not resolve the issue entirely. Approximately 20 per cent of our music is drawn from SODRAC's repertoire. The remaining 80 per cent of our musical works come from other sources and, according to this bill, we would not have to pay any royalties to use these works.

The Chair: Does this seem like a considerable sum of money to you?

Mr. Guérin: The money as such is not the issue. The more basic issue is that of the exceptions given on the one hand and taken away with the other. When we entered into these agreements, the expectation on our part was that there would be an exception, that this was provisional and that we would be able to benefit from these rights.

Senator Pépin: You asked me to put my first question. Since I am new to this job, I am somewhat less informed than my colleagues. You indicated that you had serious concerns about discrimination against francophone and ethnic stations. Could you give me an example so that I can understand your concerns more clearly?

Mr. Guérin: Our concern stems from the fact that this provision, as currently worded, requires us to pay a royalty when we use French-language music which is included in SODRAC's repertoire. However, we do not have to pay to use music from other sources. It is as simple as that. The exemption has a discriminatory effect that could last several years. Basically, this exception had been promised to us for several years, following a Supreme Court decision calling upon the legislator to provide an exception in the legislation.

Senator Pépin: Did you say that this ruling was in March of 1982?

Mr. Guérin: Yes, that is correct.


The Chair: Senator Adams, we must leave the room at 10. If I could restrict you to a short preamble and a short question.

Senator Adams: Our witnesses have said that people have been working on Bill C-32 for the past eight years. It also appears that Canadian Heritage did not have any experts present when drafting the bill. One of the witnesses last night said he has been back and forth for five years. This bill became a business.

The department appears to have arbitrarily constructed this bill. Have you had legal advice on how this bill might affect companies within the association? Would you recommend writing a letter to your members respecting the clauses in the bill?

Mr. McCabe: As I understand the question, you described the process which went into producing this bill. You are about right, Senator Adams.

When we witnessed the spectacle in the House of Commons committee, we did not have the impression of a bill that had been carefully developed by experts and worked through, taking into account the concerns of industry and the economic circumstances in which we are operating.

There was a mad scramble to get officials to go out into the hall with a member of the government and a member of the Bloc and write out an amendment, bring it in and hand it to a Liberal member who would then say, "I move amendment 337(b)". That sort of thing was typical of that occasion. It was not a bill that had a pretty passage.

The Chair: We must discuss the House with great care, Senator Adams and Mr. McCabe.

Senator Adams: We are not all experts here. However, we understand your concerns. We can learn from you telling us how other people have made mistakes, at least before those things are drafted, because we are operating radios and televisions every day and new technology changes things.

In 18 months, a new computer bought today will be obsolete. It is the same thing in the radio and TV industries now.

What about records? Sometimes a hit record will be played on the radio every 15 minutes. Does that affect how a station will broadcast that song? Does it cost extra? How does that work for the radio owners?

Mr. Hildebrand: You still pay on your total gross revenue every day. That is the first thing you expense every day is the total gross revenue which allows for the music.

I want to bring this back again to the smaller radio stations who generally have fewer resources and who are involved with community building. It is more difficult there because, as you saw from the list of material that I submitted, we will use thousands of musical selections through the course of a season.

If I were operating a top 40 or a hit radio station, I would have relatively few musical pieces because I would be repeating selections. It would be much simpler in that environment.

However, for the smaller radio stations across Canada which operate on relatively small resources and reflect the communities they operate in, this whole music process is much different. As a result, we use a much broader scope of music, with far more local material. All these measures go to make our job more difficult and less productive.

As I pointed out before, our first objective is to provide service to our listeners in our communities. That should not be gummed up by the lack of common sense in the whole process. If there is one thing that is lacking in this whole process that I have seen, it is that there is no common sense and no day-to-day thinking as to what goes on. That is what frustrates me.

Senator Adams: You are concerned that we should have some kind of amendment. You attended the several hours in which the House of Commons committee met. Did anybody ask or request what kind of amendment you would like to have?

Mr. McCabe: We put forward, senator, the amendments that we thought would deal with these practical problems. They were ignored.

Senator Adams: Do you have them with you now?

Mr. McCabe: Yes.

The Chair: You mentioned them in your brief.

Mr. McCabe: The French language version will be here today. I am sorry about the delay.

The Chair: Thank you.


The Chair: The Subcommittee on Communications has approved its report and the committee is scheduled to table it in the Senate next week. I suggest the following course of action. We have here Senator Johnson and Senator Watt, members of the communications committee which was entrusted with the task of carrying out these special studies. Since the subcommittee is represented on the committee and you have developed a certain amount of expertise in this field, I would like to make a suggestion. You have read your subcommittee's report and a draft has been distributed to all committee members.


May I suggest to members of the committee that we approve today the report of the Subcommittee on Communications so that it can be out next week. I will accept a motion to that effect on the adoption of this report.

Senator Johnson: I so move, Madam Chair.

The committee adjourned.

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